When you are struggling to make the minimum monthly payments every month, or perhaps skipping a monthly payment, you become vulnerable to debt consolidation scams.
(prHWY.com) February 15, 2012 - Chicago, IL -- When you are struggling to make the minimum monthly payments every month, or perhaps skipping a monthly payment, you become vulnerable to debt consolidation scams. The process of consolidating your debts should result in lowering the monthly payment to an affordable amount, as well as not further damaging your credit rating. There are different approaches to consolidation, and some of them are legal but less than ethical.
No debt consolidator can promise to reduce the amount of money you owe. Your indebtedness is to the credit card companies, and it is solely up to them to decide if they will reduce the interest rate, stop charging penalties or lower your balance. They are not under any obligation to do so.
Some debt consolidators collect their fees upfront rather than a portion every month. This means that your creditors could go unpaid for 6 months of longer, and possibly filing court action against you. Your credit could be far worse if you get sucked into one of these scams.
When you consolidate your bills, the consolidator pays a portion of the minimum payment every month, depending on how much you can afford. If you owe a small balance to a creditor that you would normally pay off in two or three months, do not assume that the
debt consolidation company will pay it off that quickly. If you sign up for a four-year repayment program, then that small debt could be spread to 48 payments, rather than paid off in two or three payments. This denies you the ability to raise your credit score with a paid-in-full status.
Employers run credit checks on current employees as well as potential new hires. If your credit report reflects several months of unpaid bills, you could be denied a hard-earned promotion or even demoted. Your credit is a reflection of your character, so choose carefully when interviewing consolidation companies.
Another option open to you is applying for a
debt consolidation loan. This is entirely different from a repayment program. The loan company pays off all of your creditors immediately, putting you on the path to good credit. You would make one payment every month until the loan is paid. The interest rate is lower than what most credit cards charge, meaning that more of every payment goes to principal instead of interest. Since people interested in consolidating debt usually already have damaged credit, your application could get rejected at banks and credit unions. Look into online venues when considering your options.
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